You may have noticed that I’ve been focusing on budgeting over the last several weeks: My Advice to the Person Budgeting for the First Time, Mustang Budgeting and Other Methods to Implement a Budget, and Performing Budget Triage. The response has been wonderful with over 100 people of various ages, careers and households emailing me to request a copy of my excel budget sheet. Through these emails I was privileged to learn about people’s current financial circumstances, financial frustrations, triumphs, and hopes for the future. What a joy it has been to read and respond to each email (if you did not get a response from me, then your email must have ended up in my spam folder; please contact me again at email@example.com).
Now that so many people have (hopefully) started on their budgets, I wanted to write another post that gives you some hope. I remember when I first sat down to budget right out of college and realized just how little money I had to spend in each category. In my case, this was self-imposed because I wanted to meet my savings goals. But it still felt limiting. Instead of dwelling in that feeling of limitation I overcame it by getting creative. Over the years I have found that you can grow the spending power of your budget from month to month without adding any money to it. Not only can this help with inflation, but it can also give you some breathing room.
What you need to do is monitor your spending to figure out what you spend the most on, and then use your current budget to essentially make investments that will save you money on these items in the future. This means making purchase decisions now that will save you money in your future budgets.
The Need to Build Breathing Room into Your Budget
You can live the rest of your life with a monthly budget and you would be doing better financially than a lot of other people. But don’t you want more for yourself? What if you go without raises/promotions for several years, or introduce new little ones into your life without introducing extra money, or are faced with continued inflation on nondurable goods like gas and groceries? Your budget’s spending power would erode over time and suddenly having $300 to spend on groceries/toiletries each month would no longer cut it. At that point you would need to either make more money or allocate less money towards your future goals (savings, retirement, college funds, travel funds, etc.) to make up for the shortfall.
If you want to be ahead of the game and give yourself and family some breathing room, then you need to not only think about how your budget will help you survive in this month, but also how it will help you thrive in future months.
Make ‘Investments’ Now to Free Up Money Later
To achieve this, take a small amount of each month’s budget to “invest” in future cost savings. A future cost savings could be a new vehicle for work transportation or a degree in management to help you advance in your career. With a tight budget, this could be $5 or $10 per month to start with (adjust the amount accordingly). It may feel impossible at first, but it’s really you doing something nice for your future self. Here’s how to “invest” that money:
- Purchase More Durable Non-Durable Goods: Sometimes it pays off to spend a few extra dollars when purchasing an item now so that it will last longer down the road. For example, we purchased a metal paint pan that we washed and reused throughout our home on numerous projects rather than purchasing the cheaper, flimsy, plastic kind that gets the job done but is meant to be thrown away. We spent more money on glass bird feeders because we learned that the plastic kind, though cheaper upfront, had to be replaced within months due to squirrels tearing through the holes.
- Buy Items that Replace Future Spending Occasions: Perhaps you can use your ‘investment’ dollars this month to purchase items needed to change your own oil. This investment will pay you back for months and potentially years to come by keeping you out of service shops. When looking for a crib for a newborn, spend more upfront so that your crib can be turned into a bed, thus saving you from having to enter a bed store in a few, short years.
- Make it Yourself for Lower Cost and More Product: I recently purchased all of the ingredients necessary to make my own laundry detergent for about $8 (I say about because I actually have enough ingredients left to make another half batch). Not only should this last for at least twice as long as store-bought brands, but it also will reduce the amount of chemicals in our home. Think of areas in your own life where you can make something from scratch and save your family money.
- Buy Bulk: For items that you use consistently (like the copious amounts of mustard my husband consumes each month), spend that extra money you have allocated to invest on making a bulk purchase that will cost more up front but last longer. You could buy bulk diapers, pet food, cooking oil, batteries, toilet paper, etc. The trick is, don’t use more of the item now that you have more of it in your home (one way to avoid this is by pouring the bulk item into your last, normal-sized empty container of the product and storing the rest so that it is out of reach/out of sight). Try to stretch it out so that next month or even two months from now you do not need to purchase the item within your budget at all!
Give Purpose to the Extra Money
As the months go by the effect of making small investments in your future budget will begin to give you some breathing room. Perhaps one day towards the end of a future month you will notice that you have an extra $30 left burning a hole in your pocket because of the snowball effect you’ve created. Are you going to splurge with the extra money? Could you tack this money onto next month’s budget and begin an even bigger snowball of extra funds? Or do you want to set the money aside in savings? The choice is yours to make, but it is a choice that deserves some of your attention as you continue to make small ‘investments’ and see the gains in future budgets. We all know how extra money tends to disappear.
By setting aside a small amount of money in your budget each month to allocate towards freeing up money in the months to come, you are making life a bit easier on yourself, hedging your budget against future inflation, and ensuring that you will be able to continue making those necessary payments into your savings account.